Shares of RH (NYSE:RH) are soaring over 40% today, after releasing fiscal second quarter results that beat forecasts, largely thanks to stronger sales and subsequent cost leverage, as well as improving margin trends. It’s important to note that RH struggled in 2016, but it appears that its business is materially improving.

Specifically, the luxury home furnishing giant posted adjusted earnings per share of $0.65, topping consensus estimates of $0.47 and guidance of $0.43-0.50. Gross margins rebounded 40 bps to 34.1% from 33.7% last year, driven by higher membership revenues and further supply chain efficiencies.

Looking ahead, RH now expects FY17 EPS of $2.43-2.67 on revenue of $2.42-$2.46 billion. The company also introduced Q3 and Q4 guidance of $0.68-0.80 and $1.34-1.51, compared to current Street forecasts of $0.39 and $1.51, respectively.

In the wake of the earnings announcement, Oppenheimer analyst Brian Nagel reiterated a Perform rating on RH, without suggesting a price target. (To watch Nagel’s track record, click here)

Nagel commented, “Quarterly reports and other updates from Perform-rated RH have lately amounted to some of the most volatile data points in an already very fluid Hardlines sector. As we dig through the Q2 (Jul.) results and updated FY17 (Jan. 2018) guidance that RH reported after the close yesterday (Wednesday, September 6th), we come away encouraged with indications of stabilization in trends at the chain, but still worried about risks of a seemingly shifting business model strategy. Gross margins and cash are now less concerning. But, we keep in mind that only a couple of quarters ago RH was lowering projections upon top-line misses and expense overruns. We are monitoring RH closely and will come back with more complete, updated thoughts.”

Most of Wall Street is surveying the rising luxury furnishings firm from sidelines, with TipRanks analytics demonstrating RH as a Hold. Based on 7 analysts polled in the last 3 months, 6 rate a Hold on the stock, while 1 issues a Sell. The 12-month average price target stands at $53.75, marking a nearly 24% upside from where the stock is currently trading.